6 ms·

What is keeping Boeing's share price so stable in the wake of such catastrophic news for the company this year?

by davidhyde 7y ago

swampthinker 7y ago
Military contracts
- jandrese 7y ago
  That and the implicit guarantee from the government that Boeing is too big to fail.
  - whatshisface 7y ago
    The USG is already putting tariffs on foreign planes. We have all the downsides of nationalization without any of the benefits of collective ownership (except for the fact that Boeing is in people's retirement accounts, which is a little collective ownership). Capitalism and socialism on their own both have provisions for taking care of the elite and taking care of the average person. What we have now with these pseudonational industries is a combination of both that takes the elite-benefiting parts of capitalism and combines them with the elite-benefiting parts of socialism.
    - magduf 7y ago
      >The USG is already putting tariffs on foreign planes. How so? They can't put tariffs on foreign planes purchased by foreign airlines, and most of the airlines in the world are not American.
      - whatshisface 7y ago
        They are putting tariffs on foreign planes purchased by airlines in America. It's mentioned in the last paragraph of the linked article.
        briandear 7y ago
        Airbus gets EU subsidies that works as an effective tariff against Boeing.
        Gwypaas 7y ago
        And Boeing gets US subsidies. "The World Trade Organization said on Thursday the United States had ignored its request to halt a subsidized tax break for Boeing Co in its main plane-making state of Washington as a 15-year-old transatlantic trade row edges towards tit-for-tat sanctions." https://www.reuters.com/article/us-eu-usa-aircraft-wto/wto-says-us-failed-to-halt-state-tax-subsidy-for-boeing-idUSKCN1R923B https://www.reuters.com/article/us-eu-usa-aircraft-wto/wto-s...
        magduf 7y ago
        It's funny how the US complains about China propping up or even owning (usually partially) big corporations there, but they do the same with Boeing and many other companies. At least in China, the government is the one that has the final say on everything, and the state-owned corporations have to do what the government wants. Here, the corporations get to do what they want, but they still get subsidies from the government but without being required to operate in the interests of the government or the nation at large.
- onepointsixC 7y ago
  Defense contracts account for a fraction of their civilian revenues.
  - vonmoltke 7y ago
    I assume "a small fraction" is what you meant. According to their most recent 10-K, the Defense, Space, and Security business unit represents about 23% of Boeing's revenue and 13% of their profit. Some portion of the Global Services revenue comes from government contracts as well, though, so the true contribution is higher. https://www.sec.gov/cgi-bin/viewer?action=view&cik=12927&accession_number=0000012927-19-000010&xbrl_type=v# https://www.sec.gov/cgi-bin/viewer?action=view&cik=12927&acc...
avocado4 7y ago
The fact that these news are not catastrophic, but rather wishful politically-motivated thinking. Boeing is here to stay, until maybe a viable competitor in China springs up.
rsynnott 7y ago
I think partly it’s the nature of the business. Even if every airline wants to drop the 737 and order all A32xes from now on, they can’t; Airbus simply doesn’t have the pipeline. Boeing will sell either a patched up MAX or a less ambition re-engine (a MEDIUM?) Probably for less money, but it’ll sell; the airlines really have very little choice.
- luch 7y ago
  it's worse than that : airplane pilots are certified for a particular set of aircraft (and that's why the 737 max came to existence). Even if a company wanted to boycott Boeing, on top of refresh its current fleet it would have to re-train and re-certified all its employees. Weirdly enough, most of Air France & KLM fleet are comprised of Boeing planes
  - alexis_fr 7y ago
    > Most of Air France & KLM fleet are comprised of Boeing planes Are you sure about that? On WP I see 79 Boeing out of 223 planes for Airbus, but I’m not expert. Is there any wider fleet to consider? https://en.wikipedia.org/wiki/Air_France https://en.wikipedia.org/wiki/Air_France KLM has 13 Airbus out of 123 airframes, that part is correct. https://en.wikipedia.org/wiki/KLM https://en.wikipedia.org/wiki/KLM HOP is mostly Bombardier/Embraer, etc.
snowwrestler 7y ago
I'm sure Boeing would have loved to have those orders, but 50 planes is not catastrophic. In terms of the aircraft group, Boeing has steadily growing 787 orders and deliveries, with about 500 orders yet to deliver. In terms of their space program, they are close to testing their manned capsule and just got a light touch program review, while SpaceX got put through the ringer. And there are other aspects to Boeing that I'm not familiar with, but I'm sure don't relate directly to the 737 MAX. As for Airbus, they have had to kill their A380 program, seemingly prematurely, in the face of declining interesting and cancelled orders. So, it's not all roses on the other side of the pond either.
- SmellyGeekBoy 7y ago
  > In terms of their space program, they are close to testing their manned capsule and just got a light touch program review, while SpaceX got put through the ringer. I'm sure this will end well for them...
  - snowwrestler 7y ago
    Ha! Yeah, the light touch worked so well for the 737 MAX. Well at least the first flight of their capsule will be unmanned...
  - dnautics 7y ago
    Oh no kidding. I'm putting puts on BA ahead of their upcoming capsule failure in two weeks.
    - CamperBob2 7y ago
      Except the whole point of this subthread is that Boeing's stock price never faces any actual consequences, regardless of how badly the company screws up. Boeing will not be allowed to fail, even if it personally bankrupts every taxpayer in the United States. And they know it.
      - dnautics 7y ago
baq 7y ago
Pension plans and pension funds.
PedroBatista 7y ago
Old money, national pride and insurance from the tax payer.
divbyzer0 7y ago
$20 billion in Share buybacks. They effectively support their own share price, but this cannot go on for ever. They increased their dividend which will also support a higher share prices, but again this can only continue for a finte period. And as another poster mentioned: Military contracts.
dboreham 7y ago
In analyzing a stock price you need to look at what other people perceive about it, which is not the same as objective facts. So in this case it tells us that other people don't think the company's sales will be hurt much. I believe they are wrong (and sold most of my Boeing stock right after the second crash) but only time will tell.
johngalt 7y ago
1. The market correctly understands that Boeing is backstopped by the US government. Removing any large downside risk. 2. Even including the problems with the 737 max, Boeing has an exceptionally good safety record. 3. Regulatory capture of the FAA by Boeing is bad news for consumers, but not necessarily for shareholders. 4. Investing in aircraft manufacturers during a growing economy is reasonable and Boeing is one of only two airplane manufacturers positioned to take advantage of the trend.
- TwoHeadedBeast 7y ago
  On your fourth point, a downturn is widely anticipated and aircraft manufacturers would be particularly affected.

What is keeping Boeing's share price so stable in the wake of such catastrophic news for the company this year?

swampthinker 7y ago

Military contracts

jandrese 7y ago
That and the implicit guarantee from the government that Boeing is too big to fail.
- whatshisface 7y ago
  The USG is already putting tariffs on foreign planes. We have all the downsides of nationalization without any of the benefits of collective ownership (except for the fact that Boeing is in people's retirement accounts, which is a little collective ownership). Capitalism and socialism on their own both have provisions for taking care of the elite and taking care of the average person. What we have now with these pseudonational industries is a combination of both that takes the elite-benefiting parts of capitalism and combines them with the elite-benefiting parts of socialism.
  - magduf 7y ago
    >The USG is already putting tariffs on foreign planes. How so? They can't put tariffs on foreign planes purchased by foreign airlines, and most of the airlines in the world are not American.
    - whatshisface 7y ago
      They are putting tariffs on foreign planes purchased by airlines in America. It's mentioned in the last paragraph of the linked article.
      - briandear 7y ago
        Airbus gets EU subsidies that works as an effective tariff against Boeing.
        Gwypaas 7y ago
        And Boeing gets US subsidies. "The World Trade Organization said on Thursday the United States had ignored its request to halt a subsidized tax break for Boeing Co in its main plane-making state of Washington as a 15-year-old transatlantic trade row edges towards tit-for-tat sanctions." https://www.reuters.com/article/us-eu-usa-aircraft-wto/wto-says-us-failed-to-halt-state-tax-subsidy-for-boeing-idUSKCN1R923B https://www.reuters.com/article/us-eu-usa-aircraft-wto/wto-s...
        magduf 7y ago
        It's funny how the US complains about China propping up or even owning (usually partially) big corporations there, but they do the same with Boeing and many other companies. At least in China, the government is the one that has the final say on everything, and the state-owned corporations have to do what the government wants. Here, the corporations get to do what they want, but they still get subsidies from the government but without being required to operate in the interests of the government or the nation at large.
onepointsixC 7y ago
Defense contracts account for a fraction of their civilian revenues.
- vonmoltke 7y ago
  I assume "a small fraction" is what you meant. According to their most recent 10-K, the Defense, Space, and Security business unit represents about 23% of Boeing's revenue and 13% of their profit. Some portion of the Global Services revenue comes from government contracts as well, though, so the true contribution is higher. https://www.sec.gov/cgi-bin/viewer?action=view&cik=12927&accession_number=0000012927-19-000010&xbrl_type=v# https://www.sec.gov/cgi-bin/viewer?action=view&cik=12927&acc...

avocado4 7y ago

The fact that these news are not catastrophic, but rather wishful politically-motivated thinking. Boeing is here to stay, until maybe a viable competitor in China springs up.

rsynnott 7y ago

I think partly it’s the nature of the business. Even if every airline wants to drop the 737 and order all A32xes from now on, they can’t; Airbus simply doesn’t have the pipeline. Boeing will sell either a patched up MAX or a less ambition re-engine (a MEDIUM?) Probably for less money, but it’ll sell; the airlines really have very little choice.

luch 7y ago
it's worse than that : airplane pilots are certified for a particular set of aircraft (and that's why the 737 max came to existence). Even if a company wanted to boycott Boeing, on top of refresh its current fleet it would have to re-train and re-certified all its employees. Weirdly enough, most of Air France & KLM fleet are comprised of Boeing planes
- alexis_fr 7y ago
  > Most of Air France & KLM fleet are comprised of Boeing planes Are you sure about that? On WP I see 79 Boeing out of 223 planes for Airbus, but I’m not expert. Is there any wider fleet to consider? https://en.wikipedia.org/wiki/Air_France https://en.wikipedia.org/wiki/Air_France KLM has 13 Airbus out of 123 airframes, that part is correct. https://en.wikipedia.org/wiki/KLM https://en.wikipedia.org/wiki/KLM HOP is mostly Bombardier/Embraer, etc.

snowwrestler 7y ago

I'm sure Boeing would have loved to have those orders, but 50 planes is not catastrophic. In terms of the aircraft group, Boeing has steadily growing 787 orders and deliveries, with about 500 orders yet to deliver. In terms of their space program, they are close to testing their manned capsule and just got a light touch program review, while SpaceX got put through the ringer. And there are other aspects to Boeing that I'm not familiar with, but I'm sure don't relate directly to the 737 MAX. As for Airbus, they have had to kill their A380 program, seemingly prematurely, in the face of declining interesting and cancelled orders. So, it's not all roses on the other side of the pond either.

SmellyGeekBoy 7y ago
> In terms of their space program, they are close to testing their manned capsule and just got a light touch program review, while SpaceX got put through the ringer. I'm sure this will end well for them...
- snowwrestler 7y ago
  Ha! Yeah, the light touch worked so well for the 737 MAX. Well at least the first flight of their capsule will be unmanned...
- dnautics 7y ago
  Oh no kidding. I'm putting puts on BA ahead of their upcoming capsule failure in two weeks.
  - CamperBob2 7y ago
    Except the whole point of this subthread is that Boeing's stock price never faces any actual consequences, regardless of how badly the company screws up. Boeing will not be allowed to fail, even if it personally bankrupts every taxpayer in the United States. And they know it.
    - dnautics 7y ago

baq 7y ago

Pension plans and pension funds.

PedroBatista 7y ago

Old money, national pride and insurance from the tax payer.

divbyzer0 7y ago

$20 billion in Share buybacks. They effectively support their own share price, but this cannot go on for ever. They increased their dividend which will also support a higher share prices, but again this can only continue for a finte period. And as another poster mentioned: Military contracts.

dboreham 7y ago

In analyzing a stock price you need to look at what other people perceive about it, which is not the same as objective facts. So in this case it tells us that other people don't think the company's sales will be hurt much. I believe they are wrong (and sold most of my Boeing stock right after the second crash) but only time will tell.

johngalt 7y ago

1. The market correctly understands that Boeing is backstopped by the US government. Removing any large downside risk. 2. Even including the problems with the 737 max, Boeing has an exceptionally good safety record. 3. Regulatory capture of the FAA by Boeing is bad news for consumers, but not necessarily for shareholders. 4. Investing in aircraft manufacturers during a growing economy is reasonable and Boeing is one of only two airplane manufacturers positioned to take advantage of the trend.

TwoHeadedBeast 7y ago
On your fourth point, a downturn is widely anticipated and aircraft manufacturers would be particularly affected.